The Protocol Commons

Netscape and the Zero-Marginal-Cost Capture of the Web

A compressed binary file named mosaic-netscape-0.9 appeared on a public File Transfer Protocol (FTP) server in Mountain View, California, on October 13, 1994. Six months earlier, Marc Andreessen had teamed up with Silicon Graphics founder Jim Clark to launch Mosaic Communications Corporation, soon renamed Netscape. While working as a $6.85-an-hour undergraduate programmer at the National Center for Supercomputing Applications (NCSA) at the University of Illinois, Andreessen and staff programmer Eric Bina had built NCSA Mosaic. Mosaic was the first cross-platform graphical web browser that displayed inline images alongside hypertext across Unix, Windows, and Macintosh computers. After the university claimed commercial licensing rights to the Mosaic name and codebase, Clark invested $3 million of his own money. He hired Bina and the core Illinois engineering team, and they built a faster commercial browser from scratch codenamed "Mozilla."

In 1994, commercial personal computer software was distributed like physical hardware. Microsoft, Lotus, and WordPerfect stamped software onto magnetic floppy disks or CD-ROMs, packed them into shrink-wrapped cardboard boxes with thick printed manuals, and trucked them to retail chains such as Egghead Software and CompUSA. Physical manufacturing, freight, inventory financing, and a 40 percent retail store markup meant that shipping each additional copy carried a substantial marginal cost. Software publishers required tens of millions of dollars in working capital before a new application could reach mass adoption.

Netscape bypassed the physical retail channel by using the Internet itself as its distribution pipeline. The company released Netscape Navigator over FTP under a licensing policy dubbed "free, but not free." The browser was free for individual consumers, students, and academic institutions, with a ninety-day unrestricted evaluation period for corporate desktops.

Because digital binaries replicate across packet-switched networks at the negligible cost of server bandwidth, Netscape's marginal cost of distribution approached zero. Meanwhile, the economic value of the two-sided browser network scaled multiplicatively with the number of connected client browsers $N$ and commercial web servers $M$:

To overcome the sluggish throughput of 14.4-kilobit-per-second dial-up modems, Bina engineered Netscape Navigator to render text and progressive JPEG images incrementally on the fly while opening four parallel TCP/IP socket connections. Earlier browsers had frozen on a blank screen until an entire webpage finished downloading. On Navigator, users could begin reading text and clicking hyperlinks within two seconds of requesting a page.

Within four months of the October 1994 release, more than six million copies of Navigator were downloaded worldwide without a single retail box being shipped. By mid-1995, Netscape captured over 75 percent of global web browser usage.

Having captured the universal client desktop at zero marginal cost, Netscape used that footprint to set the technical protocols of electronic commerce. Rather than waiting years for formal standards bodies to ratify specifications, Netscape engineered critical capabilities directly into Navigator. Those additions included HTTP cookies to maintain shopping-cart state across stateless web pages, Secure Sockets Layer (SSL) public-key cryptography to encrypt credit card numbers in transit, and Brendan Eich's JavaScript language for client-side execution.

Netscape then monetized the other side of the network by selling high-margin Netscape Commerce Server software—priced between $1,500 and $50,000 per server—to banks, retailers, and media corporations eager to transact with Navigator's millions of users. When Netscape went public on NASDAQ on August 9, 1995, just sixteen months after incorporation, its shares doubled on the first day of trading to value the company at $2.9 billion.